SBA Grants Hurricane Relief Deferments, Urges Credit Unions, Other Lenders to do Same

WASHINGTON - As criticism swirls around the SBA on its disaster loan process, the agency has urged credit unions and other lenders to grant a 12-month repayment deferral. On Oct. 11, SBA Administrator Hector Barreto encouraged 7(a) participating lenders, 504 program Certified Development Companies and microlenders to provide deferment relief for borrowers with SBA-backed business loans in the primary disaster areas affected by Hurricane Katrina and contiguous parishes/counties. The declared disaster areas may be found at www.sba.gov/disaster, by going to hyperlink titled "Hurricane Katrina SBA Disaster Notices and Fact Sheets." Barreto said effective immediately, the agency is providing an automatic 12-month deferment of principal and interest payments for SBA-serviced business and disaster loans that were in regular servicing status on August 29 in those primary counties/parishes designated as federal disaster areas. Interest will continue to accrue on the loans involved, according to the SBA. After the deferment period, SBA will review borrower circumstances on a case-by-case basis to determine the nature and extent of further relief that may be appropriate. Barreto defended the agency's efforts at an Oct. 7 House Small Business Committee hearing as criticism has come from some small business owners who've complained the disaster loan approval time is too long. Critics, including Rep. Nydia Velazquez (D-N.Y.), have accused the SBA of taking too long to process loan applications. One New Orleans business co-owner, Randy Perkins testified that "three months is too long to wait for assistance" and told legislators that his video production company's monthly average revenue went from $18,000 to $525 over the past 30 days. The SBA said more than 1.6 million hurricane victims have registered for assistance with more than 660 loans being approved totaling $41.45 million, at press time. "Small businesses are the backbone of our economy and will play a fundamental role in the recovery of the Gulf Coast region," Barreto said. "We at the SBA are committed to providing them with the help they need to get back on their feet, and a deferment can go a long way toward that goal. We strongly encourage our lending partners to follow suit." Meanwhile, House Small Business Committee Chairman Don Manzullo (R.Ill.) announced at the hearing he is putting together a new legislative package that would temporarily suspend payments on SBA loans until small businesses can rebuild their customer base; increase the size of low-interest SBA disaster loans to homeowners and small employers; and include provisions to ensure that small businesses are not overlooked for federal contracts for rebuilding the Gulf region. -